Mid-America Business Systems v. Sanderson

David
H. Redden and John A. Fabian, III, FABIAN MAY & ANDERSON,
PLLP, for plaintiff.

Daniel
L. Lowin, MESSERLI & KRAMER P.A., for defendants.

MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF'S
MOTION FOR TEMPORARY RESTRAINING ORDER

JOHN
R. TUNHEIM Chief Judge

Plaintiff
Mid-America Business Systems (“Mid-America”)
brings this action against its former employee, Kevin
Sanderson; his new employer, Kardex Handling Solutions, LLC
(“KHS”); Kardex Remstar, LLC (“Kardex
Remstar”), and Richard Hutson, Senior Director of Sales
for KHS. Mid-America alleges that Sanderson breached the
client non-solicitation, employee non-solicitation, and
confidentiality clauses of a contract he signed when he
became a full-time employee at Mid-America. Mid-America also
alleges that Sanderson tortiously interfered with
Mid-America's prospective economic advantage and
misappropriated Mid-America's trade secrets in violation
of the Minnesota Uniform Trade Secrets Act
(“MUTSA”) and the Federal Defend Trade Secrets
Act (“FDTSA”). Mid-America alleges that KHS
tortiously interfered with the contract signed by Sanderson,
tortiously interfered with Mid-America's prospective
economic advantage, and violated the MUTSA and the FDTSA.
Mid-America accuses KHS and Hutson of defamation. Finally,
Mid-America alleges that Kardex Remstar breached the employee
non-solicitation clause of the companies' settlement
agreement by hiring Sanderson through KHS.

Mid-America
now moves for a temporary restraining order
(“TRO”) enjoining Sanderson from soliciting
Mid-America's clients and employees, enjoining KHS from
procuring breaches of Sanderson's contract, and enjoining
both Sanderson and KHS from misappropriating
Mid-America's trade secrets. Mid-America also seeks
expedited discovery for a preliminary-injunction hearing.

Because
the Court will find that Mid-America has not met its burden
of showing a likelihood of success on the merits and a
likelihood of irreparable harm to justify the extreme remedy
of a TRO, the Court will deny Mid-America's motion for a
TRO and deny its request for expedited discovery for a
preliminary-injunction hearing.

FACTUAL
BACKGROUND

I. THE PARTIES

Mid-America
is a “leading provider of large-scale storage and
organization systems.” (Decl. of Gil Roscoe Sr.
(“Roscoe Decl.”) ¶ 2, Aug. 22, 2017, Docket
No. 7.) Kevin Sanderson worked for Mid-America as a service
technician from June 2007 to November 2016. (Id.
¶¶ 3, 20-21; Decl. of Kevin Sanderson
(“Sanderson Decl.”) ¶¶ 2, 8, Sept. 13,
2017, Docket No. 27.) Sanderson began working for KHS as a
service technician in March 2017. (Sanderson Decl. ¶
12.) KHS is majority owned by Kardex Remstar, which is the
North American arm of a Swiss company that manufactures
automated storage and retrieval systems. (Decl. of Mark
Dunaway (“Dunaway Decl.”) ¶¶ 1-2, Sept.
13, 2017, Docket No. 29.) Kardex Remstar operates
internationally through networks of authorized dealers, of
which KHS is one. (Id.)

Mid-America
was previously an authorized dealer for Kardex Remstar and
was the exclusive dealer for Kardex storage and retrieval
systems in a region covering parts of Indiana, Illinois,
Minnesota, Wisconsin, North Dakota, and South Dakota.
(Id. ¶ 3.) In November 2016, Kardex Remstar
sent Mid-America of a list of deficiencies to cure and
objectives to accomplish so that Mid-America could maintain
its status as an authorized dealer. (Id. ¶ 4.)
Kardex Remstar terminated its dealer contract with
Mid-America on February 13, 2017, because Mid-America
“failed to timely cure those deficiencies.”
(Id.) KHS then became Kardex Remstar's
authorized dealer for most of the region Mid-America had
previously covered. (Id.)

II.
SANDERSON'S EMPLOYMENT AT MID-AMERICA

The
parties dispute the terms of Sanderson's initial
employment agreement: Sanderson says he was hired as a
permanent employee in June 2007, while Mid-America claims
that Sanderson was initially hired as a temporary employee
and subject to a three-month probationary period. (Sanderson
Decl. ¶ 2; Roscoe Decl. ¶ 3.) Mid-America admits,
however, that the probationary period was an “unwritten
policy” when it hired Sanderson. (Second Decl. of Gil
Roscoe Sr., ¶ 2, Sept. 18, 2017, Docket No. 38.)
Sanderson denies ever being subject to a probationary period.
(Sanderson Decl. ¶ 2.)

Mid-America
alleges that Sanderson signed a “Non-Compete
Agreement” when he became a full-time employee in
September 2007, at which time Mid-America gave him additional
training, access to confidential information, and pay
increases.[1] (Roscoe Decl. ¶ 5.) Had he not signed
the agreement, Mid-America would have terminated his
employment. (Id.) Sanderson denies entering into any
such agreement and has “no memory” of signing it.
(Sanderson Decl. ¶ 2.)

During
his employment, Mid-America sent Sanderson to Maine to be
trained at a Kardex Remstar facility and also gave him
further training specific to Kardex machines and products.
(Id. ¶ 5; Roscoe Decl. ¶ 7.) In 2010,
Sanderson became a “certified” Kardex Remstar
technician, and Mid-America promoted him to Lead Service
Technician. (Roscoe Decl. ¶ 6; Sanderson Decl. ¶
6.) Sanderson asserts that his job involved only service work
and that he was not involved in sales or solicitation of
business. (Sanderson Decl. ¶ 4.) Mid-America claims that
it trained Sanderson in a role focused on “selling and
servicing” Kardex machines and alleges that some
internal training that Mid-America gave him dealt with sales.
(Roscoe Decl. ¶¶ 7-8.)

Mid-America
also alleges that it gave Sanderson access to non-public
information regarding its customers, costs, pricing,
operations, and business processes. (Id. ¶ 9.)
This information included customer names and locations,
customer preferences, maintenance and warranty schedules, and
information about cost, pricing, and margins on new equipment
- all information that Mid-America deems
“confidential.”[2] (Id.) This information
also included an internal sales manual “containing
extensive cost and price information for virtually all of
Mid-America's parts and services.” (Id.
¶ 10.) Mid-America asserts that the information in the
internal sales manual provides a competitive advantage and
that the company takes steps to protect this information,
including requiring employees to sign confidentiality and
non-compete agreements. (Id. ¶¶ 11-12.)
Mid-America says that its customer relationships, which it
has spent years developing, are also safe-guarded by these
agreements. (Id. ¶¶ 13-14.)

Sanderson
left his employment at Mid-America on Monday, November 7,
2016. (Id. ¶¶ 20-21.) The parties dispute
why Sanderson left, although the reasons are not relevant to
the present motion. Mid-America believes that, prior to
leaving, Sanderson copied or transferred confidential
information from his company-issued laptop and cell phone and
then deleted data to “cover his tracks and impede
Mid-America's ability to maintain service continuity for
the customers he served.” (Id. ¶ 22.)
Sanderson denies transferring any data from the company
electronics or taking anything confidential or proprietary,
claiming that he ran a factory reset on the cell phone to
remove his personal information and that he did not delete
anything from the laptop. (Sanderson Decl. ¶ 9.)

III.
SANDERSON'S EMPLOYMENT AT KHS

Sanderson
began working for KHS as a service technician in March 2017.
(Id. ¶ 12.) His job is to “install and
service Kardex Remstar products.” (Decl. of Richard
Hutson (“Hutson Decl.”) ¶ 2, Sept. 13, 2017,
Docket No. 28.) He is not involved in sales or soliciting
business. (Id.) However, Mid-America alleges that
Sanderson has been soliciting its customers.

First,
Mid-America alleges that Sanderson made a service call at
Viking Drill and Tool (“Viking”) in May or June
2017 and “convinced it to cancel a planned purchase of
a $100, 000 machine from Mid-America.” (Roscoe Decl.
¶ 25.) Mid-America learned about Sanderson's work
from a Viking employee who showed Mid-America repair work
that Sanderson had performed on Viking's old machine
“to dissuade it from buying a new machine from
Mid-America.” (Id.) Mid-America finds
Sanderson's contact with Viking “suspect”
because Viking uses a “legacy” version of
Kardex's machines that predates Kardex's Customer
Relationship Management program (“CRM”).
(Id.) Mid-America alleges that, because Vikings
information was not in the CRM, Kardex Remstar did not know
that Viking had Kardex machines, thus Kardex Remstar could
not have told KHS that Viking needed service. (Id.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KHS
denies these allegations, asserting that a Viking employee
left a voicemail for KHS stating that Viking had some
questions and wanted someone to look at its Kardex Remstar
machine. (Hutson Decl. &para; 5.) KHS assigned the work order
to Sanderson because Viking was in his territory.
(Id. &para; 5.) Sanderson denies reaching out to
Viking and denies attempting to solicit or sell the company
anything. (Sanderson Decl. &para; 14.) He claims that he told
Viking that it would likely need to purchase a replacement
machine soon because his repair was temporary. (Id.)
KHS emphasizes that it was logical for Viking to call KHS
...

Our website includes the first part of the main text of the court's opinion.
To read the entire case, you must purchase the decision for download. With purchase,
you also receive any available docket numbers, case citations or footnotes, dissents
and concurrences that accompany the decision.
Docket numbers and/or citations allow you to research a case further or to use a case in a
legal proceeding. Footnotes (if any) include details of the court's decision. If the document contains a simple affirmation or denial without discussion,
there may not be additional text.

Buy This Entire Record For
$7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.